REFILE-UPDATE 1-Anglo American makes bond market return

LONDON, April 3 (IFR) - Anglo American is set to sell its first public bond since it was stripped of its investment-grade status in February 2016 following the capitulation of global commodity prices.

The mining company started marketing a US dollar-denominated benchmark five-year deal at a yield of 4.25%-4.375%, and a US dollar-denominated benchmark 10-year deal at 5.125%-5.25% on Monday.

“It was a matter of time before they came back to the market, but they wanted to wait until sentiment had recovered from last week’s volatility,” a lead banker said.

Anglo, rated Ba1/BB+, initially held investor calls two weeks ago.

However, bankers on the deal attributed the recent dip in oil prices, which saw Brent futures fall to just above US$50 per barrel on March 22 before recovering to above US$53, and a turn in sentiment in equities - the S&P 500 fell 1.4% in March - as the reason Anglo delayed its market return, as well as the underperformance of peer company Glencore.

Commodity trader Glencore’s US$1bn 10-year bond was bid at a wide of 183bp over Treasuries last week, 13bp wider than where it priced on March 21, according to Tradeweb data.

However, that bond has since recovered to a bid of 176bp over Treasuries on Monday afternoon.

THE RETURN

Anglo American’s euro bonds lost up to 48 points when its relegation to junk 14 months ago initiated a bout of forced selling from investment-grade accounts.

But its credit profile is looking brighter again. The company was upgraded by Moody’s to Ba1 with a positive outlook earlier last month, from Ba2, to reflect its improving credit profile and accelerated debt reduction, the agency said.

S&P also has a positive outlook on its BB+ rating.

Anglo American paper has subsequently recovered strongly. Its €750m 3.25% Apr 2023 bond is bid at a cash price of 106.05, compared with lows of 59 in January 2016, according to Tradeweb.

Anglo American has been de-leveraging its balance sheet since early 2016. In February of that year, it bought back around €1.6bn-equivalent of short-dated euro, sterling and US dollar bonds, which cut its debt pile by US$190m.

Anglo conducted a liability management exercise last month to buy back more of its euro, sterling and US dollar notes in a bid to reduce its net debt.